Good judgment comes from experience. Experience comes from bad judgment.

We're several years into the world of on-demand marketplace companies, which means experience is now coming to bear, i.e. we've made enough mistakes in the past to (hopefully) make fewer mistakes in the future. There's now a level of sophistication that allows us to think more critically about what makes marketplace companies successful now and into the future.

Recently, I was working through a company's proposed deck in the on-demand marketplace space and we kept coming back to one question - what value are you creating beyond facilitating the transaction between people? Without having a good answer to this question, it's hard to prove that your company can grow and scale.

Marketplaces essentially connect demand to an appropriate supplier. At its core, this transaction involves the following things:

onboarding (signing up your supply and demand)

matching (choosing the right supplier for the demander)

communication (sending messages between the matched supplier and demander)

payment (cash money!)

At one time, this was a hard thing because you needed to develop the basic platforms to enable these systems. There was no Twilio to enable SMS and VOIP calling through phone numbers. There were no push notifications platforms on smartphones. There was no Braintree (and Stripe) to quickly and easily automate payments.

Once we remove those, only onboarding and matching remain as differentiators. Onboarding is itself being turned into into a marketplace through companies like OnboardIQ. Its individual steps are also each handled by companies like Checkr (background checks) and Karma (define your reputation score beyond the background check). Additionally, because onboarding is public by nature, there are great examples and best practices that we can all learn from.

At the end, all that remains is matching and this is where companies create real value at scale through technology. If all you're doing is matching up random demand A with random supplier B, it's hard to show how you'll be successful. After all, what's to prevent any other company from doing exactly the same thing? In contrast, if your ability to match is powered by a core technology that is hard to create or duplicate and enables supply and demand to scale by orders of magnitude, then you've got something special.

Note that I've conveniently ignored all the operations, the execution and design but I'm specifically focusing on the idea here rather than the ability to realize it, which is a whole different thing for many other blog posts. As marketplace company ideas continue to pop up, I find myself coming back to this idea of being a skilled matchmaker. Ultimately, I think these are the companies that will wind up being most successful.